State springs budget surprise

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The Bottom Line: To help solve the state's budget crunch, California officials are suggesting that the state borrow property-tax revenues from counties and cities. Santa Clarita would lose $3 million this next fiscal year. City officials oppose the idea.

Santa Clarita officials are going back to the budgetary drawing board after learning the state is considering borrowing up to $3 million from property-tax revenues to help close its deficit.

The news came moments before City Manager Ken Pulskamp presented the City Council with an overview Tuesday of the pared-down 2009/10 fiscal year budget he's proposing.

The state Department of Finance presented Governor Arnold Schwarzenegger with a state budget revision that proposes borrowing 8 percent statewide from city, county and special-district property tax revenues - topping out a reported $2 billion.

According to the state finance department's May revision, there is still a $17.2 billion budget gap.

For the proposal to move forward, the governor must agree to it and issue a proclamation declaring a severe financial hardship.

Then the state Legislature would have to approve it with a two-thirds vote in each house.

If the governor accepts the proposal, and if the proposal is passed by the legislature, the city would have little recourse.

In Santa Clarita's case, the state could grab about $3 million, City Treasurer Darren Hernandez said.

He said the city brings in about $11 million annually in property-tax revenue.

"The state budget is in shambles," he said Wednesday. "It surprised me that they hadn't come after that money earlier."

The bright side, he said, is that as a provision of Proposition 1A - passed in 2004 by California voters - the state would be required to repay the money within three years with interest.

Pulskamp has already met with department managers and advised them of the state's recommendation, city spokeswoman Gail Ortiz said.

If the state follows through and borrows the money, she said the city will have to make even deeper budget cuts.

"Three million dollars is a lot of money," she said. "(Every year) we've prepared a balanced, on-time budget. We don't want anything more than that from the state.

"They need to get their house in order up in Sacramento."

The City Council could consider the possibility of signing an official letter of opposition, Councilwoman Marsha McLean said.

McLean said she stands behind the League of California Cities and its opposition of the proposal.

The League - which represents 480 cities - has decried the finance department's proposal, saying it would mark a return to "binge borrowing."

"We've already got one city that's declared bankruptcy," said Chris McKenzie, the league's executive director, referring to Vallejo, located in the San Francisco Bay area. "We don't need any more."

The effects of the borrowing would vary from city to city, he said. However, "it would pose another major revenue problem for every city."We're going to fight like crazy to make sure this is taken off the table."

McKenzie said the league is encouraging cities to explain to residents what the proposal means for municipalities.

It remains to be seen whether or not the state will follow through and borrow the money.

"I think it's only inevitable if all the cities in the state stand by and let it happen," McLean said.